E-business tax primed for scrutiny

E-business tax primed for scrutiny

Bill aims to level the retail playing field

A draft bill on e-business tax, a levy on online purchases, advertisements and website rent in Thailand earned by operators with a presence outside the country, will go before the cabinet this month.

The draft will require online business operators with a foreign presence to remit value-added tax (VAT) from transactions occurring in Thailand to the Revenue Department through an electronic payment channel. They must sign up as operators under the VAT system if they earn over 1.8 million baht a year from online trade in Thailand, said Prasong Poontaneat, director-general of the department.

The e-business tax will level the playing field for digital platform service providers situated in Thailand as their transactions are now subject to VAT if they earn annual revenue exceeding 1.8 million baht from online service, he said.

The department will also revoke the VAT exemption for online shopping of goods worth less than 1,500 baht purchased from foreign vendors outside of Thailand and shipped by mail. The move is intended to pave the way for the department to tax all online purchases.

Purchases from foreign e-commerce vendors outside of Thailand are subject to 7% VAT only if the value exceeds 1,500 baht, but many online operators exploit the loophole by breaking up invoices into amounts below the threshold to skirt the levy.

During the recent second public hearing on the draft bill, it was said digital platform service providers that fail to remit payment or only pay a portion of the VAT will be subject to fines, similar to those for offline general operators registered for the VAT system.

The draft bill, expected to go into effect this year, will allow the Revenue Department to tax growing online purchases and service transactions.

A source at the Finance Ministry said the draft bill will unlock international trade agreements that prohibit the tax-collecting agency from collecting levies from digital platform service providers based abroad that earn income from transactions in Thailand.

Thailand is not alone in promulgating such a law, the source said.

In another development, Mr Prasong said 3.3 million individual taxpayers have already filed tax returns for the 2017 tax year, well below 4 million over the same period a year earlier.

Earlier, the Revenue Department estimated 11 million taxpayers are obliged to file an income tax return for the 2017 tax year. The tax filing season for the 2017 tax year runs through the end of March for paper filing, while the deadline for electronic filing is April 9.

Mr Prasong recently blamed insurance companies' payment documents for health insurance premiums for the small number of tax filings, as the cabinet made that item tax deductible late last year.

Around 40 billion baht in tax refunds is estimated to be claimed by taxpayers and 10 billion will be refunded to 800,000-900,000 taxpayers, he said. Some 90% of the 3.3 million taxpayers filed online.

In the meantime, the Revenue Department has signed a memorandum of understanding with the Commerce Ministry's Department of Business Development to share financial statements of corporations that filed tax returns through the tax department's e-filing system.

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